Indian Elections 2019: Whose Sarkar?

India is heading towards national elections asking ‘abki baar, kiski sarkar’ – whose government are the people going to get? Modi or Gandhi? GRI’s Acting Editor-In-Chief analyses the potential outcomes of the elections.

India’s Mahatyohar

The world’s largest democracy is only days away from partaking in what the Indian Election Commission terms Desh ka Mahatyohar. This is the country’s great festival – its general elections. 900 million eligible voters from across 29 states and 7 union territories will decide whether PM Narendra Modi and his Bharatiya Janata Party (BJP) return to another 5 years in power. Or perhaps whether the opposition Indian National Congress (INC), which governed the country for decades after independence, stages a comeback.

India follows a Westminster-style parliamentary model where candidates are elected to the lower house or Lok Sabha. There are 543 seats to be contested, with 272 being the majority needed to form a government. There will be 1 million polling stations and 7 phases of voting across 5 weeks to undertake this mammoth endeavour. Results will be declared on May 23rd.

Contenders and contentions

This general election can ultimately be termed as PM Modi versus Rahul Gandhi 2.0. The first version saw Modi surge to an empathetic win. He used a strong stance on corruption and terrorism to ride an anti-incumbency wave and come to power in 2014. Using him as the face of the party, BJP won a majority of 282 Lok Sabha seats (336 including partners). This is an unprecedented margin for over 30 years in Indian politics since grand coalition governance had been the norm. While PM Modi has pursued a development-centric agenda, his party has also exploited nationalist sentiments among the Hindu majority and polarised minorities.

Many former supporters and party members insist that his promises of kickstarting the economy and addressing inequality have failed. They are critical of Modi’s non-inclusive decision-making style and his claims of success being far removed from the actual ground realities. Therefore, the overwhelming narrative of BJP easily returning to power has recently been challenged. A series of events has made the upcoming elections a closer contest than most expected.

Gandhi is a scion of India’s most influential political dynasty. His father and grandmother were both Prime Ministers. His great-grandfather Jawaharlal Nehru was one of the founding fathers of modern India and also a Prime Minister. He is using Modi’s failure on the economic front to reinvent his party’s relevance and popularity. Gandhi claims this election will determine whether Indian democracy will remain as we know it or not. This is because the BJP is subverting the constitution’s stress on secularism and attempting to turn it into a Hindu state. There has been a sharp increase in the violence against minorities and the PM has always been slow in condemning these attacks.

Indian economy: Reforms and growth

Having beaten China, India remains the fastest growing economy in the world. It has grown by $1 trillion under PM Modi since 2014 and enjoys a per capita income increase of 35% during the same period. Flagship government policies such as ‘Make in India’ aggressively courted foreign direct investment. 2018 reported $45 billion in FDI, almost double the amount from 2014. This saw India jump 65 positions higher in the Ease of Doing Business index – the most notable improvement recorded by the World Bank.

This is an acceleration in the trend of opening up the country after decades of inward-looking practices. These reforms set the tone for the short to medium term about the direction of economic policy. India is looking to open more sectors (aviation, defence, retail) to FDI and not returning to previous protectionist measures. This is particularly significant, given the international financial uncertainty exacerbated by America’s erratic approach towards China and the European Union. India offers a huge market with a growing middle class that is open to foreign investment and is an alternative to a slowing Chinese economy.

Furthermore, there have been structural reforms to strengthen fiscal health. Taxation revenue has increased given that combined direct and indirect taxes have climbed from 10.14% of GDP in 2013-14 to 12.13% over 18-19. This is a very consequential increase in a 5-year period and indicates the growing presence of the formal economy.

Indian economy: Problems and constraints

The country has seen its share of shocks under Modi’s tenure. Most worryingly, unemployment data suggests it is the highest in the last 4 decades, reaching 6.1%. India needs to create 1 million jobs a month to keep at pace with its working-class population. However, over 11 million jobs were lost in 2018. This is a disturbing trend because 84% of these job losses were in rural India. As a result, the most vulnerable – women, uneducated, wage/farm labourers, and small traders were inordinately impacted. This base formed the core of Modi’s support and failure of job creation could potentially cost him the election. It has also caused rural disenchantment about his ability to bring about lasting economic benefits for the lower and middle classes.

Additionally, BJP introduced a sweeping tax change to bring uniformity for businesses across the country. While in the long-term, this is a necessity for fiscal prudence, the short-term disturbances have been numerous. The rollout of this Goods and Services Tax (GST) is ridden with complications. Smaller businesses unarguably form the majority of the business ecosystem in India. These were worst hit by their lack of infrastructure to cope with the demands of GST. As a result, this affected the economy enough to slow down growth from 8.2% to 6.6% in 2018. The electorate is more likely to vote based on these current interferences than the overtime benefits of the scheme.

Moreover, Modi stunned the country by abruptly banning the two highest denomination banknotes in circulation. These accounted for 86% of India’s cash. While the goal was to curb ‘black’ money and stop illegal funds from hampering the formal economy, it wreaked havoc. BJP failed to take into account that the informal sector is still the dominant faction in the country. A move towards digitalisation cannot singularly be achieved by starving a cash-dependent economy. In the medium term, this error in cash ban has outweighed the public opinion on other efficient policies undertaken by the government. The most vulnerable sections of society are worst hit by these moves and are still reeling from the impacts.

Are the farmers happy?

No. In India the role that farmers have to play in elections is all-important. In 2014, almost 50% of all land-owning farmers voted for the BJP based on promises of having their income doubled and loans waived off. This was an exceptional achievement because farmer votes are usually divided between regional parties and caste vote-banks. Therefore, they rarely consolidate for one national party.

Unfortunately, 92.6 million farming households in the country are in vicious debt cycles. Over 300,000 farmers have committed suicide in the last 20 years. These numbers suggest that governments would have taken the peasantry crisis front and centre in their policies. Yet, no sustainable, long-term solutions exist to ease these economic burdens on them. This creates an imminent socio-economic and political risk for the country along the lines of inequality and deprivation from the benefits of growth.

The disappointment at the failure of Modi’s schemes adds additional risks because people feel “cheated”. A 16-million strong union of farmers has staged 4 mega protests against the BJP government, demanding an increase in minimum support prices for crops. This turn from support base to opposition is a serious obstacle for the incumbent party’s efforts of coming back to power. The farmers abandoning the ‘Modi Wave’ will most likely be the dominant reason in the BJP not reaching majority alone in 2019.

Is the Indian National Congress staging a comeback?

Most likely. The prime accusation of PM Modi against INC and the Gandhi’s has been that of corruption. In the wake of multi-billion dollar scams, the electorate voted them out of power in 2014. However, leading up to the 2019 contest, the grand old party of India seems to be making a comeback. Its leader, Rahul Gandhi has been asking tough questions about the government’s role in allegedly helping private business houses and compromising national security. Modi’s image as an honest politician tackling black money and corruption has taken a hit after this uproar over defence signings with France on the Rafale fighter jets.

The INC managed to win 3 important state elections in 2018. Supporters claim this is the beginning of their resurgence. This new swing in state elections indicates voters are unhappy with the non-materialisation of economic assurances on a grand scale. Though these states were BJP bastions, it is important to note that the INC won 2 states by very slender margins (Rajasthan and Chhattisgarh) and its vote share was the same as the BJP’s in the 3rd (Madhya Pradesh).

Therefore, voters are not entirely convinced about the INC. To gather momentum, Gandhi promised income support of Rs. 72,000 ($1040) every year for the poorest 20% families in the country. He claimed to have studied the fiscal implications of this policy termed NYAY (which translates to justice in Hindi). Populist measures before elections is a common theme in India. The fiscal (im)prudence of this announcement is still being assessed.

Abki baar, kiski sarkar?

The official slogan of BJP’s 2014 campaign was abki baar, Modi sarkar (Modi’s government this time) but whose government does India get in 2019? Speculating on the upcoming results, it is highly likely that PM Modi will return to power with BJP winning between 200-220 seats. His popularity has seen a sharp increase after the recent military showdown with Pakistan. Retaliating against attacks in India by targeting terror camps in Pakistan, he has set the precedence for taking definitive military action. Before this, India did not have a strategic response to deal with these assaults. Given its popularity with the public, it will be next to impossible for the incoming government to go back to the previous status quo of not responding with surgical strikes. BJP’s hardline stance on terror has shifted the narrative from jobs, farmers, and the Rafale deal to strong national security.

However, this is not enough. It is improbable, given the above-mentioned points, that Modi returns with an absolute majority of the BJP. Unlike last time, he will have to concede more to regional parties in order to form a steady coalition and stake claim for government formation.

The INC is likely to mark a comeback and improve from their dismal showing in 2014, where they mustered only 44 MPs. The country is poised to have a stronger opposition. This will create problems to the certainty of passing legislation; something the BJP enjoyed over the past 5 years. While the predictability that a majority government brings will be welcomed by the electorate and investors alike, it is important to note that a strong opposition is necessary for the strength of any democracy.